Gulf Coast hotel sales climb into new territory

Long eclipsed by markets like Miami and Key West, recent deals signal that trends may be changing.

When it comes to hotel sales superlatives, Miami, Key West and Orlando typically occupy the top ranks of lodging project lists.

But in the past year, especially, Gulf Coast hospitality venues have overtaken their mostly southern counterparts both in terms of overall pricing and per-room dollar volume.

Last quarter, for instance, the Ritz-Carlton Sarasota’s $171 million sale to Dallas-based Braemar Hotels & Resorts Inc. topped all Florida hotel transactions on a per-key basis — a key industry benchmark — according to a new report from commercial real estate brokerage firm Colliers International.

“The Ritz-Carlton’s buyer has been specifically targeting assets of that luxury nature in an effort to bolster its portfolio, but for Sarasota to be among the key targeted areas for Braemar speaks very highly of Sarasota and its growth as a destination,” says Kent Schwarz, a Colliers International executive vice president of the firm’s hotels practice.

Schwarz adds that the Ritz-Carlton sale marks the first time in his memory that a Sarasota hotel property has topped statewide statistics.

By comparison, the 589-room Hilton Fort Lauderdale Marina’s $174 million sale ranked as the largest Florida hotel deal in the quarter, though its per-key price equated to $295,409 — on par with the $243,506 per-key average for the top 36 hotel transactions from July 2017 to the present.

The Sarasota resort also came in as the second-biggest Florida sale per-key in the past year at $642,857, according to a study by Tampa-based hotel consultant The Plasencia Group based on statistics from Real Capital Analytics.

Only Sunstone Hotel Investors’ $175 million purchase of the 175-room Ocean’s Edge Resort & Marina, in Key West in July 2017 — at $1 million per room — edged out the Ritz-Carlton Sarasota, which also includes a Lakewood Ranch golf course and clubhouse and a Lido Key private beach club together with a 266-room downtown hotel.

"Anytime you have a Ritz-Carlton, a Four Seasons, a St. Regis or other luxury brand, you’re going to attract the next tier of investor. There just aren’t that many opportunities invest in those flags.” — Nick Plasencia, vice president, The Plasencia Group

Moreover, Gulf Coast properties comprised four of the 10 largest hotel sales in Florida in the past year based on overall dollar volume.

In addition to the Ritz-Carlton Sarasota, transactions involving the Hyatt Regency Coconut Point Resort & Spa, in Lee County; the Tampa Renaissance; and the Postcard Inn, on St. Pete Beach, made up the Top 10, according to the Plasencia Group report.

The 454-room Hyatt Regency sold for roughly $220 million; the 196-room Postcard Inn for $47.4 million; and the 293-room Renaissance Tampa for $68 million.

Nick Plasencia, a Plasencia Group vice president, says the sales — both in terms of overall volume and price per key — are indicative of larger trends in the hospitality sector in Florida.

“For a lot of properties in Florida this has been a record year, stemming in large part from displaced demand in Puerto Rico and the Caribbean as a result of last year’s devastating hurricanes,” says Plasencia.

“We’ve seen a big increase in international travel as well,” he adds. “In 2016 and 2017, international travel was soft, especially among Canadians, but that has rebounded well and new flights have been added to bring those people here.”

Colliers International’s report shows that total Florida sales in the second quarter of 2018 grew to their highest level in the state — at roughly $1.5 billion — since the same three-month period in 2016.

At the same time, markets like Sarasota have gained traction with investors over the past decade and pushed sales prices upward, Colliers International-sourced statistics indicate.

From 2008 to the present, Sarasota has had 37 hotel transactions valued at a total $653 million.

But of that total, more than one-third of the overall dollar volume — or $232 million — has occurred this year, in just four transactions. By comparison, between 2012 and 2015 the Sarasota market experienced a total volume of sales of $204 million, spread out over 13 sales.

Two years ago, Sarasota had 11 distinct hotel deals, but combined those transactions only amounted to $146 million in dollar volume.

During the same 10-year period, Tampa generated 179 hotel sales overall with a total dollar volume of $3.2 billion; Orlando had 260 sales priced at $6.2B; and Miami experienced 350 transactions that generated $13 billion, the highest amount of any submarket in the state.

Plasencia says he isn’t surprised by the Ritz-Carlton Sarasota’s price or that its buyer is an institution, either, given its luxury stature, the uptick in industry and market fundamentals for hotels in the Sarasota and Bradenton areas.

“Anytime you have a Ritz-Carlton, a Four Seasons, a St. Regis or other luxury brand, you’re going to attract the next tier of investor,” he says. “There just aren’t that many opportunities invest in those flags.”

From 2012 through June of this year, on a trailing 12-month basis, average occupancy for Sarasota/Bradenton hotels stood at 68.4%, a gain of 11%, according to leading hospitality consultant Smith Travel Research.

But the market’s average daily rate and revenue available per room, two key industry metrics, had even greater gains during that same period.

Average daily rate rose 27% from 2012 through mid-2018, to $146.11 per room. Revenue per available room rose 40.4% during that same six-year period, to $99.92 per room, Smith Travel states.

“The fact that a real estate investment trust acquired the Ritz-Carlton really puts it in the highlights of other, like buyers,” Plasencia says. “It shows the Gulf Coast of Florida has really become an institutional-caliber destination. Three or four years ago, that same REIT capital would have been focused almost exclusively on Miami.

“But I also understand why the area is now on the radar. We’ve seen interest in select Naples properties, like the La Playa, all the way up the coast to the Don Cesar in St. Pete,” he adds. “And it’s because the area is growing in terms of population, especially for wealthy re-locations, and that, in turn, has made it a more attractive investment market.”